OTTAWA, Dec 21 (Reuters) - Canada's annual inflation rate
fell to a three-year low of 0.8 percent in November, raising
questions about the Bank of Canada's stubborn insistence that
the next move in interest rates will be an increase.

The annual rate, reported by Statistics Canada on Friday, is
far below the Bank of Canada's 2.0 percent target. Analysts had
expected annual inflation of 1.1 percent, down from 1.2 percent
in October.

"I suspect they (the Bank of Canada) knew by a little while
ago that they had overestimated growth, and I don't think
there's going to be any sudden changes, but it will raise the
question again whether they'll soon back away from their
tightening bias," said Doug Porter, deputy chief economist at
Bank of Montreal.

The Bank of Canada has repeatedly said it will eventually
need to raise interest rates despite clear signs that the
economy is slowing. It has held its overnight lending rate at 1
percent since September 2010, the longest period of bank
inactivity on rates since the early 1950s.

Separately, Statscan said the economy grew just 0.1 percent
in October. The Bank of Canada's latest forecast says
fourth-quarter growth will be 2.5 percent annualized, though
that estimate now looks very optimistic.
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